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April 8, 2025 - The Charlie Kirk Show
31:35
The Real History of Tariffs
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Hey, everybody.
Andrew Colvin in for the one and only Charlie Kirk, who is out on assignment.
He's in Illinois at another campus stop, our biggest one yet.
He'll have more for you tomorrow.
In the meantime, we got lots of tariff news.
The market's rebound.
What's causing that?
What's behind it?
And then we bring on John Carney from Breitbart, who is the tariff expert at Breitbart.com.
Should check him out.
We talk about what ultimately is the president's goal here.
And then we talk about Smoot-Hawley in the 1930s and Reagan and protectionism.
Does it work or does it not work?
Very fascinating conversation.
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Here we go.
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All right, welcome to the Charlie Kirk Show.
Andrew Colvin in for Charlie Kirk, who's on assignment today.
We have lots of updates from yesterday.
What a difference a day makes.
That is the theme of, I think, this beginning part of our show here.
What a difference a day makes.
Over the weekend, I mentioned this yesterday, that it was the sky is falling.
It was the chicken little folks.
Everything was awful.
On Sunday night, I was a part of a bunch of different text message chains that were all about how everything was awful, everything was terrible, and we were going to be heading into economic calamity.
And yesterday got off to a really rough start.
It was a volatile day, there's no doubt about it.
Currently, however, we are up across the indices, and that is quite the change from yesterday.
We are up about 1,000 points on the Dow, 400 points on the NASDAQ, and 123 points on the S&P 500.
So the sky is not falling.
We're not out of the woods yet, there's no doubt about it.
There is reason for real optimism.
Real optimism.
We're going to play some of these clips that show what a difference a day makes.
Now, I want to start with something that Secretary of Treasury Scott Besant said yesterday.
He said, here's the key.
President Trump has given himself, afforded himself maximum leverage, maximum negotiating leverage.
And this is key, and I'm going to explain it after the clip.
148. President Trump has maximum negotiating leverage right here, right now.
I think it was a big mistake, this Chinese escalation, because they're playing with a pair of twos.
Traditionally, if you look at the history of the trade negotiations, we are the deficit country.
So what do we lose by the Chinese raising tariffs on us?
We export one-fifth to them of what they export to us.
So that is a losing hand for them.
They're playing with a pair of twos.
Now, what does he mean by that?
Scott Besson is saying that China is exporting so much to us, we're only exporting one-fifth to them.
So if they raise tariffs on us, it hurts us about one-fifth as much as it hurts them.
The other piece of that puzzle is that China is playing with a house of cards.
We often call them that their economy is kind of like a paper tiger.
It is weaker than the world would have – Why is that?
Rife with oversupply in their economy, meaning they'll build buildings for all of these renters or buyers, and they sit at 20%, 30% occupancy.
And when you run an economy like that, you're prone to having vulnerabilities.
And one of their main vulnerabilities is that they are an export economy.
They have to export to the biggest market in the world, namely America, in order to survive and thrive.
They're not able to do that if they've got 104% tariffs slapped on them from the United States.
So we are playing with the upper hand.
President Trump knows that he has leverage, and he is exerting that force with...
Vicious cruelty on the Chinese who have exerted their force on us with vicious cruelty for years and years and years, and he's getting the leverage back.
That's what this is about.
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There's some breaking news that hit that Donald Trump, President Trump, the Trump administration has just won another Supreme Court case against these rogue activist judges.
This time they affirm his authority to fire probationary workers.
So this affects like 15,000, 16,000 different firings that have happened that were held up in the courts.
So we've got Mike Davis, Article 3 Project joining us later.
This is just stringing together common sense, Article 2 powers of the presidency with the authority to actually run the country as the founders saw fit.
They saw an energetic...
executive that was able to move quickly and respond to crises and not always be held up by the whims of the courts or the legislature.
So there are obviously places in the Constitution and authorities that are vested in the president and then put in the legislature, but...
This has gone on for far too long in Trump's presidency where they're using judicial activism in order to thwart his agenda and the mandate given to him by the people.
So this is a big win.
We're going to dive into this even more.
But I want to get back just quickly here.
And we've got John Carney from Breitbart who we're going to go into all this tariff stuff.
But this is brinksmanship.
President Trump is using brinksmanship.
At a level we have not seen in a long time to bring our trading partners who have been abusing us back to the table.
So let's continue.
I want from Scott Besson here.
Play cut 160.
Larry, I can tell you that there are 50, 60, maybe almost 70 countries now who have approached us.
So it's going to be a busy April, May, maybe into June.
And Japan is a very important military ally.
They're a very important economic ally.
And the U.S. has a lot of history with them.
So I would expect that Japan's going to get priority.
Just because they came forward very quickly.
But it's going to be very busy.
And if President Trump again gave himself maximum negotiating leverage, and just when he achieved the maximum leverage, he's willing to start talking.
Maximum leverage, 50, 60, 70 different countries that have come to the table, including Japan.
Including this morning, new news on South Korea.
President Trump put a truth social about that.
This is exactly why you're seeing the markets react.
You're seeing the markets react because they believe that President Trump is going to revert back to deal-making posture.
And this is what the entire international financial community is hoping for and waiting for.
Now, I want to caution everybody.
I'm not convinced.
That President Trump is ready to make a deal, for example, zero for zero tariff deal.
And now let me explain why.
Because actually the lion's share of unfair trade practices that exist between countries is not about tariffs.
Tariffs are an important piece of that, certainly.
But the lion's share of those practices that are unfair, cheating, would be currency manipulation, would be other trade barriers, would be dumping product.
There is much to discuss in this way.
And this is fascinating.
So Art Laffer is a famous economist from the Reagan era.
He goes on Fox all the time.
He's a friend of Charlie.
Famous for the Laffer curve.
The Laffer curve is basically a place where you could lower taxes to a certain point where you hit an optimal rate.
And at that optimal rate...
That you would increase the tax revenue coming into the treasury, right?
So that's counterintuitive for most people because you'd think if you just keep raising taxes, you'd make more revenue for the treasury and for the country.
Well, that's not true according to the Laffer curve.
At some point, you can actually go lower.
You'll spur production in the economy, which will actually increase revenues.
We saw this with the Trump tax cuts in 2017.
Eventually, we had record revenues going into the treasury because of that.
Art Laffer wrote a Wall Street Journal piece and he referenced this clip.
And it came from the 2018 meeting where Trump threw the gauntlet down on the table and he said, hey, if you guys reduce all your trade barriers, we'll do the same.
So play cut 162.
Good pull, Ryan.
162. I believe that you raised the idea of a tariff-free G7.
I did.
Oh, I did.
That's the way it should be.
No tariffs, no barriers.
That's the way it should be.
And no subsidies.
I even said no tariffs.
Ultimately, that's what you want.
You want a tariff-free, you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that's not fair.
So you go tariff-free, you go barrier-free, you go subsidy-free.
That's the way you learned at the Wharton School of Finance.
Is this where we're headed?
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Without further ado, like I said, I'm so excited to bring in my next guest.
That's John Carney from Breitbart.
He is the...
Finance and Economics Editor at Breitbart.com.
John Carney, welcome to the show.
Thank you for joining us.
Hi, thanks for having me.
John, you know, Alex Marlowe is a good friend, and he raves about you when it comes to tariffs.
I mean, he's been saying, you've got to get John on, you've got to get John on.
You know, there's been so much news made in the last two days.
Sum it up for our audience as best you can.
We were down yesterday.
It was a volatile day.
Today, I think there's still some volatility in the markets, but we're up.
What is going on?
Why are we up?
Break it down.
Yeah, so one of the things that happened last week was that Trump announced tariffs that were much higher than people expected and much more comprehensive.
If you asked Wall Street where Trump was likely to go on tariffs, they thought he was going to come up with a handful of countries, maybe the worst actors, the top 15, I heard people say the hateful eight, and tariff them.
And maybe they thought their tariffs were going to be at lower rates.
So Trump surprised the market with much higher tariffs and much more comprehensive, basically the whole world.
And a lot of people weren't sure whether he was going to do reciprocal tariffs or just a 20% tariff on everything.
and he kind of cut the middle.
He did a 10% tariff on everybody and he did what they're calling like a halfsy reciprocal tariff where we're not tariffing them at the full extent of their trade deficits, but we're doing about half.
So the market freaked out.
People didn't like it.
One thing I've told a lot of people though is, look, the market going down doesn't mean your policy is wrong.
The market often goes down when something unexpected happens and it can be the right policy.
When the Fed raises interest rates, Stocks go down.
When Jerome Powell gave his famous speech in Jackson Hole two years ago, when he said, maybe it was three now, time flies, but when he said, you know, we're going to inflict pain on the economy in order to get inflation down, stocks plummeted.
And they fell for days afterwards.
and whenever the Fed sounded more hawkish, stocks went down even further.
Did that mean it was a mistake to get rid of inflation?
No, we absolutely needed to tighten monetary policy.
So he Here, I would say the same thing.
This was a policy we needed.
We need to reorient to reset global trading.
The stock market didn't like it, but they often don't like the correct policy.
Today, what we're seeing with this surge in the market, it was at least when I looked earlier, it was up.
Something like the most since 2022, a huge recovery.
One of the reasons for this is that the rest of the world is not acting as the tariff critics said they would, which was trade war.
We are going to just fight.
We refuse to give in.
No, in fact, the rest of the world wants to preserve their access to the greatest economic resource ever existed on Earth.
And that is the American consumer.
So they want to preserve their access.
They're coming to us and saying, what do we need to do to do that?
So a lot of those reciprocal tariffs, not the 10% universal tariff, but the reciprocal tariffs will be able to come down if these countries are serious about reducing their trade deficits.
They'll come down.
And I think the stock market is, this is a relief rally that the rest of the world is acting rationally.
Yeah, I mean, you kind of saw this from the EU yesterday when they said, listen, we're willing to do a zero-for-zero tariff.
You know, we're willing to make a good deal.
Europe was trying to say that, you know, listen, we're the good guys here.
You guys are being crazy, but we're going to make a good deal.
I played this clip earlier, John, but I think it bears repeating.
I saw this referenced in a Wall Street Journal op-ed by Art Laffer, came out yesterday.
And it's from a G7 meeting in Canada in 2018.
And Trump is sitting there in front of all the trading partners saying, hey, why don't we get rid of all our trade barriers?
Let's just do it.
And, you know, Art Laffer's take is that it exposed the hypocrisy of our trading partners because from Brussels to Beijing, they were all running out the door saying, no, no, no, no, no, no.
What are you talking about?
And they didn't want anything to do with this.
But this is Trump.
Basically, I think an echo from the past of saying, hey, Guys, why don't we get to this place?
Because it's not just about tariffs.
It's about currency manipulations, about dumping.
It's about blocking whole industries from your market and tariffs, of course.
So let's go ahead and play this and get your reaction to it.
162. I believe that you raised the idea of a tariff-free G7.
I did.
Oh, I did.
That's the way it should be.
No tariffs, no barriers.
That's the way it should be.
And no subsidies.
I even said no tariffs.
Ultimately, that's what you want.
You want a tariff-free, you want no barriers, and you want no subsidies, because you have some cases where countries are subsidizing industries, and that's not fair.
So you go tariff-free, you go barrier-free, you go subsidy-free.
That's the way you learned at the Wharton School of Finance.
John, do you think that Trump 2018 is still Trump 2025?
I mean, is this still his North Star, or was this brinksmanship, knowing that they would never agree to it, and he actually secretly wants to keep a certain amount of protectionism in place in America?
No, I think Donald Trump actually has a lot of faith in the ability of American businesses to compete when the level...
When the playing field is level, he really does look at the reciprocal tariffs, at least, as a temporary thing to try to force the rest of the world to live up to their free trade rhetoric, right?
Whenever we raise tariffs, they say, oh, no, no, you know, no, no, you know, please don't raise the tariffs.
That's not fair.
But they won't lower their own.
And an important thing he said in that clip is, and you mentioned, it's not just tariffs.
It's all of the non-tariff barriers to a level playing field.
We need to address those.
And I'm a little suspicious.
The Europeans said, oh, we'll go to zero tariffs on industrial products.
Well, what do they mean by industrial products?
Does that include cars?
It's not clear to me it does.
What do they mean?
And are they willing to get rid of the non-tariff barriers?
Because if they're not...
It really won't help much to just get rid of the tariffs.
In fact, their tariffs are so bad that if we impose their non-tariff barriers are so bad that if we impose those on them, they couldn't sell anything here.
We have been a country that was the consumer of last resort for the entire world.
The entire continent of Europe runs a giant trade surplus against the U.S., meaning we sell them a lot less than we buy from them.
That was intentional for a long time.
We wanted Europe to become a rich partner in the free world.
We wanted to defeat communism.
We wanted them to join us as a powerful economy to basically make the entire world richer.
Well, that worked.
Our policy worked out.
So what this is in many ways is us declaring victory.
Saying, guys, we did it.
You're rich.
Now let's have a level playing field.
You don't need unequal access to U.S. markets.
If you open your markets, our markets will stay open to you.
And if you will not do that, if you continue to run these giant trade deficits, then we are going to start to have very high tariffs on what you're doing.
Because the age of one-sided trade agreements is over.
And I think that's, even though people are freaking out about Donald Trump, I think that's true.
I don't think we're ever going back to the one-sided trade deals that we had.
I think this is the way forward.
And I think that's frankly why Europe and everybody else is coming forward now, because they realize there's no going back.
This is a page that has been turned.
We are in a new chapter of history.
So you asked about is Donald Trump 2018 the same Donald Trump today?
I'd say almost.
The thing about Donald Trump 2018, I think he was a little naive.
I think he genuinely thought it would be easy to get Europe, to get China even, to come along and do freer trade.
I think he now realizes that they'll make a lot of promises.
And they did this.
Europe... Very, very much did this in Trump's first term.
They made a lot of promises about opening up their markets and never did.
So what Donald Trump is saying this time around is the baseline is going to be tariffs.
You are going to get the tariffs if you show us that you are opening your markets to the U.S. And the way to show that is that you're buying a lot more stuff from the U.S. Then your tariff will come down.
Until then...
We're going to trust but verify.
We'll listen to you.
We'll understand what you want to do.
Your tariffs aren't going to come down until we see that you're making progress.
Exactly. John, I think that's really smart.
I noticed this yesterday with the markets.
Every time there was a little bit of a glimmer of hope that the zero-for-zero trade with Europe or whatever, the markets would react.
It would go back to the White House and they'd say, uh-uh, uh-uh, uh-uh.
And I have to just tip my hat to them.
The resolve with which they are approaching tariffs, I mean, they're not freaking out.
The sky's not falling at the White House, but it is around the markets.
But they're saying here, no, we're prepared to stomach the storm right now.
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Andrew Colvett in for the one and only Charlie Kirk, who is on assignment today doing his college tour.
He's in Illinois.
It's going to be very exciting.
Yesterday, he was in South Carolina in the rain, and still thousands of students showed up.
Just remarkable what we're witnessing.
John Carney with Breitbart News.
John, we've got, let's say, about a minute left here, and I'm going to tee up.
By the way, Georgia Maloney, breaking news here, the Italian prime minister will soon arrive in Washington to negotiate the tariffs and goods imported from Italy.
So that's another piece of breaking news.
We're hearing 50, 60, 70 countries lining up to negotiate.
So let me just set the stage here, John.
Reagan famously did not like tariffs.
He used them sparingly, but he thought long term that they would be problematic.
And he referenced himself, the Smoot-Hawley Act in the 1930s and saying that it worsened the Great Depression.
He referenced Nixon and some of the problems there, although Nixon got reelected on a landslide.
Explain, you know, are we looking at a direct parallel?
John Carney.
No, I don't think that this is anything like the 1930s at all.
And in fact, we were already headed into a depression.
I actually think the Smoot-Hawley Act is unfairly vilified.
It was not the cause of the Great Depression, and it really didn't do much to make it worse.
And Reagan, frankly, was a big protectionist.
I know he has a legend as a free trader.
It's not really true.
He did a lot to protect U.S. autos from Japanese predatory practices.
In fact, he imposed Yeah, dude.
You're getting to the crux of the issue here, John.
So we're talking about Smoot-Hawley, the 1930s, Nixon, Reagan's perspective on it.
Conservatives have generally, historically, been against protectionism.
But to your point, Reagan was dealing with...
These are not apples to apples, okay?
Reagan still had the 1980s.
We were still an industrialized country.
Our manufacturing base had not been hollowed out in the way that it has been now.
And furthermore, Reagan was a bit of a protectionist in practice.
And so we are dealing, these are not direct one-to-one parallels.
Just continue on with this thought here, because I agree with you, Smoot-Hawley gets vilified, but the Great Depression already started.
Smooth Holly didn't get, I think, put into place until the 1930s.
Black Friday, obviously, was in 1929.
John Carney, the floor is yours.
Let's start with Smoot-Hawley because this is something that comes up a lot and then we'll get to Reagan because I think the Reagan legacy is a lot more complicated than people think.
Smoot-Hawley definitely did not cause the Great Depression.
The Great Depression was caused by misguided monetary and fiscal policies, but not by a tariff on imports.
Remember what a lot of people say about tariffs on imports, that they're going to raise consumer prices.
Look back at the Great Depression.
Was the problem that prices were too high?
No. The asset prices crashed in the Great Depression.
People weren't working in the Great Depression.
It was not a period of inflation.
It was a period of deflation.
Well, one thing is they say that the rest of the world retaliated with tariffs against Smoot-Hawley.
That is a very strange and really almost insane take.
The rest of the world was actually moving towards protectionism itself.
The idea that they would just have been free traders, if not for the Smoot-Hawley tariff, that the rest of the world...
the world only reacted to the United States in 1930 is crazy.
In fact, the rest of the world was going to adopt those tariffs.
Anyway, so Smoot-Hawley was part of a movement that the rest of the world was doing, which was putting on tariffs.
Did that maybe make the Great Depression worse?
Sure. The fact that the entire world adopted tariffs may have then raised protectionist barriers, may have contributed a little bit to the Great Depression, but it was a minor thing.
And again, the context was very different than it is today.
And what I would say is that The reason why people like to blame Smoot-Hawley is because it was a big, big tariff.
And people who hate tariffs want to try to assign it to the Great Depression.
But real serious economic scholars do not think there was a large role played by tariffs, by our tariffs in causing the Great Depression.
Maybe some other tariffs may have contributed to it by hurting our exports.
But again, the world was headed into a Great Depression.
Trade was going to fall no matter what.
Exactly. We don't have to relitigate the Great Depression here.
It's akin to Hitler in that it's the only historical reference most people have about economics versus war.
The truth is that there was a tightening monetary policy that was instituted during the Great Depression as well, which is the exact opposite of what economists now use to get out of a recession or a deep recession where they ease monetary policy and they flood the So
I think it ends with a...
Universal 10% tariff, maybe a little higher, maybe a little lower.
That is basically a revenue tariff.
It is a tax to, I call it a friends and family charge, a cover charge to come into the United States.
And I think the reciprocal tariffs on most countries will come way down because they want access to the U.S. markets.
And so we will have freer trade than we had when this all started.
With the exception of China, they're not going to change, and we are going to decouple with China eventually, unless they have some sort of political revolution that overthrows their communism.
I'm not counting on that.
So I think we get decoupling with China, free trade with everybody else, and a revenue tariff that lets us cut taxes on Americans here at home.
Yeah, and John, I think, let's just be very clear, he wants better, more equal playing field with Europe, with India, with, you know, Vietnam, Cambodia.
This is really, Japan, but this is really a trade war with China.
We are decoupling from China.
He's going to force the hand of China.
And if President Trump can unite the world against...
The CCP and basically decouple the world's industrial supply chains from the CCP.
It's going to be a massive historical win.
John Carney, Breitbart.com.
Check it out.
Thank you so much, John.
We'll have you on again soon.
Thanks so much for listening, everybody.
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